Payday Loans and What You Should Know

Payday loans are a type of loan that is repaid with the borrower’s very next incoming paycheck. These types of loans are ideal for those people who have a regular flow of income, and can prove it to the lender via paycheck stub or other official documentation of employment. Payday loans, just like any other type of quick cash loan, require to be re-paid in a fairly quick time period. They offer usually around $100 to $1,000 dollars, which is the usual range amount of which a person’s paycheck will consist of. Payday loans offer a short-term loan option that should not be used often or frequently, due to potential overdraft fees or interest. If you’re someone who needs a source of cash in order to pay a bill on time before you get your next paycheck, this type of loan is of most ideal. You’re able to get the money immediately and are approved quickly. Since payday loans are not associated with credit standing, your credit will not be affected at all for any reason, when applying for and acquiring a payday loan. All this being said, it isn’t a good idea to take out a payday loan for anything less than rare emergencies.

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 When Payday Loans are Advantageous

There are a few advantages regarding a payday loan besides the ability to immediately acquire cash you need. Since they are usually within a smaller sum of money, the fees involved are fairly modest and reasonable. Since payday loans are a short-term loaning solution, there isn’t going to be any APR paid over a length of time. They require a singular flat fee that’s approximately $15 for every $100 you take out, and that fee is measured as a standard APR would be calculated if this were a traditional loan. This is a great advantage to people who have a steady flow of income and can easily pay off the flat fee, as well as the entire borrowed amount with their very next paycheck.

The maximum amount of money you’re able to withdraw solely depends on a certain percentage of your monthly pay. It is 25% of how much you’re earning on average a month, which is within reason for almost everyone. Sometimes you’ll hear that payday loan lenders “prey” on the poor, purposefully amounting the percentage rate to attain more of the borrower’s monthly pay. This is false, since the percentage is ranged to accommodate most people’s gross monthly earnings, and the people who do end up earning more than bargained for end up doing so by borrowing from more than one lender at a time. That being said, payday loans do not ask for an unreasonable amount of fees, but you should only borrow from one lender at a time.

What Type of Lenders to Look for and Avoid

Payday loan lenders do not in any way affect your credit, so if you’re taking out a loan from a lender that has somehow affected your score, chances are that that lender is not CSFA approved. You should always borrow from lenders that are CSFA approved by the Credit Bureau in order to avoid these additional fees or interest. The government mandates that all payday loans require a one-time flat fee, so lenders who do not abide by this law are potentially stealing your money. You should seek a lender that is credited and trusted by many, and to never take out a loan from one who isn’t officially CFSA approved. If any lender asks for more than the stated flat fee per amount asked for, or other more than originally induced fees, that is a red sign.


When You Don’t Need a Payday Loan

Payday loans can be desirable in the overall quick cash aspect, but if you somehow don’t qualify for this type of loan, you shouldn’t apply for it. As stated before, this loan type is leaned toward a more emergency-based situation and if you can, you should potentially seek out a different type of loan. This isn’t to say that payday loans are bad, but if you can’t afford to take out the funds in your next paycheck, this definitely isn’t the loan f you. For people who are living paycheck to paycheck, this isn’t a loan that can resolve any issues you can’t immediately pay back.

Consider all of these things before applying for a payday loan, as many people get into trouble by recklessly applying for one. There are traditional loans that you can pay back over a period of time, and despite the potentially long approval waiting period, it can be better than having to pay a variety of additional fees for not returning the money on time. Traditional loans are better suited to people with a non-frequent flow of income, or income that is paid to them by a month-to-month basis.


Before Applying for a Payday Loan

Before applying for any payday loan, it is important to consider your personal financial capabilities and specific needs. For a long-term loan need, short-term loans are not ideal and thus, shouldn’t be used for long-term financing like business starting, for example. You should have a complete mental checklist inclusive of everything regarding a payday loan like a calculated sum of your personal monthly pay and pay deducted out of your next paycheck that won’t be able to be used for the repayment. If you’re someone that requires a short-term financing solution and has a reliable income (meaning that there won’t be any unexpected paycheck deductions) and has done their research regarding good payday lenders, then these types of loans are best suited to you. As with any other type of loan, the best way to get the most out of the entire process is to make sure you’ve thought through every aspect of your financing needs and aspects before jumping in to just any type of loan. The unwanted additional fees and stress can be completely avoided if you’ve taken the right measures.